AMD Posts Solid Q413 Earnings

NEW YORK -- AMD on Tuesday announced the fourth quarter earnings for 2013 exceeding its own goal. The increased sales of new game consoles by Sony and Microsoft allowed AMD’s semi-custom SoCs and graphics products to make up for the decline in their chipsets sold for notebooks.

The chipmaker brought in $1.59 billion in revenue, an increase of 9% sequentially and 28% year-over-year. AMD’s gross margin was 35%, its operating income was 135 million, and non-GAAP operating income was $91 million. The company posted quarterly net income of $89 million, earnings per share of $0.12 and non-GAAP net income of $45 million, earnings per share of $0.06.

The sequential increase in AMD’s income surpassed management’s initial expectations of 5%. The increase was driven by strong performance in the graphics and visual solutions segment, as well as higher revenues from semi-custom SoCs and ramp up new R7 and R9 series GPU chipsets.

On an annual basis, AMD’s revenue was down 2% year-over-year to $5.3 billion. Its gross margin was 37% and its operating income was $103 million. The company registered a net loss of $83 million and loss per share of $0.11.

"Strong execution of our strategic transformation plan drove significant revenue growth and improved profitability in the fourth quarter," said Rory Read, AMD president and CEO. "The continued ramp of our semi-custom SoCs and leadership graphics products resulted in a 38 percent revenue increase from the year ago quarter. Our focus in 2014 is to deliver revenue growth and profitability for the full year by leveraging our differentiated IP to drive success in our targeted new markets and core businesses."

Computing made up 45% of AMD’s sales in the last quarter, which was down 8.6% sequentially and 12.9% year-over-year. AMD said it experienced this decrease as a result of a decline in notebook and chipset unit shipments.

AMD’s Graphics and Visual Solutions business was responsible for the remaining 55% of sales, up 28.9% sequentially and 165.3% year-over-year. Growth in these areas largely came from shipments of game consoles, semi-custom SoCs, and R7 and R9 GPUs.

“We made good progress in our three step plan to restructure, accelerate and ultimately transform AMD,” Reed said. He added that Sony and Microsoft reported selling seven million units of their new game consoles with AMD inside in less than two months, more than double prior generation consoles sold. Reed said he expects this momentum to continue. He also discussed AMD’s embedded business’s sequential growth and touted the company’s ability to leverage both X86 and ARM-based solutions in 2014.

Reed said AMD would ship one of the first 64-bit ARM solutions in 2014. He said a combination of x86 and ARM technology alongside the experience AMD has producing semiconductors at a high standard gives the company the advantage heading into this year.

It remains to be seen whether AMD can keep up the good results as time passes and we're no longer in the early, booming phase of new video game consoles--and as Intel crecovers and seeks to make a move after registering some tough losses in its traditional PC market.

The luck: they weren't competing so well with Intel in the processor IC market, so they put more emphasis elsewhere, and that market ended up declining.

The smarts: they emphasized their graphics strengths and so competed hard in the gaming market, and won for both XBox One and PS4.

Considering that the initial hump of new-box, pre-Christmas sales of these boxes is now over, they won't be able to maintain these initial sales numbers.

But maybe this will help them prepare for going forward. As companies realize Microsoft won't be supporting XP anymore, I suspect many companies will be buying new PCs this year to replace their older boxes, which may help Intel and AMD.

I wonder how exactly they were able to anticipate that. No one I know of really saw this coming. I'm not sure they saw it coming themselves--it may have just been a stroke of luck or perhaps they just did so well with gaming that it erased what otherwise would have felt like a pretty significant PC decline. Still, they are not Intel. They don't have as much riding on the traditional PC market and therefore aren't getting bitten quite as badly.

I suppose AMD have been better than Intel at estimating the processor market in the past year. AMD also suffered a significant decline in PC and notebook related sales, but they were able to make gains in the games market. I guess they are in the green because they don't have a huge stockpile of PC chip inventory to write down.

Wow - AMD? This company is very resillient. I hope this strategy can be sustainable. Their problems have been consistency but let me allow them to drink some wine in this Q. ARM is unlocking many companies and making them better.

This is a company that many had given up for dead just 18 months ago. While the Q4 outlook may not have been stellar, the results were. Congrats to the AMD team that appears to have found a successful strategy. If AMD finds success in ARM servers, this could be a very interesting turnaround story.